The Nikkei ended the day up 3.88 percent at 20,077.62, posting its biggest one-day percentage gain since November 2016. The index, which had sunk into bear market territory this week, hit 18,948.58 on Wednesday - its lowest since late April 2017.

The Dow surged more than 1,000 points for the first time overnight, leading a broad Wall Street rebound after a report of robust holiday sales helped mollify concerns about the health of the U.S. economy.

Earlier, Wall Street had suffered its worst-ever Christmas Eve drop on the back of factors including turmoil in the White House.

"Japanese shares may be higher, but with market volatility so high, tomorrow could be an entirely different story," said Soichiro Monji, senior economist at Daiwa SB Investments.

"Equities are moving up and down in holiday-thinned trade, and it would take the return of many investors next year for the market to gather its bearings."

Energy-related shares were boosted as oil surged, posting its strongest daily gain in more than two years in a partial rebound from steep losses that had pushed crude benchmarks to lows not seen since 2017.